Proposal: Extend LM Rewards on LINK Pool For 12 Weeks (Attempt #2)

Second Proposal to Extend LM Rewards on LINK pool for 12 weeks

This proposal is expected to appear on Snapshot for voting on Monday 31th May 2021 at 4:00 pm UTC. Make sure to stake your vBNT for voting BEFORE this date and time to participate in the DAO decision.

For the proposal to pass, 20% of quorum and >67% FOR votes are needed.

TL;DR

  • The launch of Bancor V3 and maintaining pool competitiveness justify an extension on the LM rewards for the LINK pool for the next 12 weeks. The proposal to extend them will most likely fail.

  • The community was largely surprised by the failure of this proposal (and other large LM extensions) and there is reason to believe that this proposal may pass if pushed again.

  • It is not feasible to change the duration or amount of LM rewards due to contract complexity. Further, if LM rewards end on a pool, it is very difficult to restart them.

  • If these pools are going to be renewed, it must happen immediately.

  • Bancor V3 has been announced and is likely to launch within the 12 week period that these LM rewards would be extended.

  • Cutting LM on these pools now is a huge change made without knowing the effects of V3.

  • It is bad business and user experience to make multiple large scale changes to the platform in a short period of time. It is smarter to wait for V3 then reassess.

  • The effects of LM rewards on inflation have been overstated and the protocol can clearly gain ground in TVL and volume while they are active.

Justification

Renewed Interest in Bancor Governance

The proposal to renew liquidity mining rewards for the LINK/BNT pool is being resubmitted over concerns that the DAO’s voting power has become significantly centralised, with the top wallets holding a considerable % of the quorum, whilst more than two-thirds of the total vBNT is unstaked and could be voting on Snapshot.

  • Total Unstaked vBNT: 48,590,025

  • Unstaked vBNT not in Vortex: 46,634,361

  • Total vBNT staked for Governance: 13,827,950

  • Only 22.2% of total vBNT is staked for Governance.

Top two vBNT addresses own 15.9% and 11.2% of quorum, respectively, at a total of 27.1%.

We have seen, through massively increased activity on Twitter, Discord, and Telegram, that there is significant public concern about LINK/wBTC/stablecoin LM rewards failing to pass. The Bancor community was lax and the failure of these proposals caught them by surprise. We have seen a large amount (1.5m and counting) of vBNT stakes in governance since they failed. It is clear that the community wants to vote on this proposal again and there’s reason to believe this proposal might pass now.

Contract Complexity Means We Must Act Now

  • Due to the design of the liquidity mining contracts, it is very difficult, bordering on impossible, to change the amount or duration of LM rewards once they have been assigned to a pool.

  • For this reason, we have an all-or-nothing decision in front of us even though it may be more desirable to choose some middle ground.

  • Due to the design of the contracts, it is very difficult to reinstate LM rewards once they have lapsed. The YFI pool, for example, had LM rewards renewed a month ago which are still not active due to the heavy lifting required by the Bancor team.

  • This means that if we do not renew these LM rewards immediately, we will not get them back for weeks and perhaps ever once V3 launches.

  • This decision is urgent and requires an appropriate amount of our attention.

Bancor V3, Business Positioning and Pool Competitiveness

According to Bancor’s team recent announcement:

  • Bancor V3 will be Bancor’s largest and most significant upgrade to the protocol.

  • V3 incorporates community feedback in the past 8 months since v2.1 went live and leverages a brand new discovery in the core AMM design that will dramatically improve the protocol’s capital efficiency while reducing friction and costs for users.

  • V3 unlocks a new way for passive LPs to earn even higher yields on their staked capital while being fully protected against IL. Just set, forget and earn high APRs, with no risk of IL.

  • The new design will encourage more liquidity to flow into the protocol, and vastly more volume to be processed, driving sustainably high yields for Bancor LPs, and allowing the protocol to collect more revenue.

  • V3 lays the foundation for Bancor to capture a much larger share of total crypto liquidity and trading revenue.

Bancor is on the cusp of V3. Every indication that we have says that this new version will be a massive change to the ecosystem. Meanwhile, we have seen the protocol continue to build TVL, trading volume, and general momentum on the back of LM rewards.

Removing LM rewards at this time is highly disruptive and flies in the face of every principal of change management. It is a change made without understanding what V3 will bring and will put Bancor’s users through two significant disruptions in a short period of time. Total protocol changes like V3 should be made during periods of stability, not during the turmoil that would occur in this case.

Some comments:

  1. The protocol is still in a growth phase, both in TVL but especially in volume (Figure 1), since Bancor v2.1 was released.

  2. LINK pool has seen an average APR of 1.76% (past 60 days), gathering $1,133,448.47 worth of fees in the past 30 days (Figure 2). To remain competitive with other protocols, LM rewards are necessary to incentivise LINK liquidity to remain staked before Bancor v3 arrives.

image
Figure 1. Bancor monthly volume. May 2021 data doesn’t include the last 3 days of the month.


Figure 2. Bancor LINK/BNT pool daily APR.

Liquidity Mining Rewards and their Impact on Inflation

  1. At this stage, LM rewards on these primary pools (ETH, wBTC, LINK, stablecoins) are allowing Bancor to stay competitive and exceed the yields offered by competitors. Swap APYs, as they exist now, are probably not enough to draw the depth of liquidity we need.

  2. 7,894,347 BNT LM rewards have been claimed from 2,557 unique addresses. Given a total current BNT supply of 204,096,941 (supply is elastic), these represent 3.87% of total supply.

  3. 20,909,923 BNT LM rewards have been re-staked from 2,095 unique addresses, far outweighing the claimed BNT.

  4. A large majority of the LM rewards are re-staked to the protocol, increasing the TVL and the space available for TKN deposits with single sided exposure. If this trend continues, the LM program is more of an asset than a liability, and can be managed more assertively.

  5. Inflation is a complex phenomenon and simply increasing the amount of BNT tokens does not necessarily lead to inflation. And, regardless of the amount of inflation that is occurring, we don’t have enough information to say that our increased TVL, decreased slippage, and attractiveness to aggregators is not worth that inflation.

Conclusions/Comments

  1. Stopping LM on these pools now may unnecessarily alienate communities who are staking on Bancor when a new solution will be released soon.

  2. The protocol is still in a growth phase, both in TVL and Volume.

  3. In response to the failure of these proposals and the concentration of voting power in a few large wallets, we’ve seen a huge increase in the amount of vBNT entering governance and discussion on social platforms. These facts alone warrant a resubmission of this proposal.

  4. We now call on all the communities that have a stake on Bancor to make their voices heard.

  5. Once V3 launches, there is nothing stopping the DAO from reexamining and even cancelling the LM rewards program in light of new information.

  6. Data taken from Dune Analytics.

Update 30th May 2021:

  • The consensus on the community call and the team’s opinion was that setting the duration for 12 weeks is sensible.
  • This duration would also allow the DAO to direct its focus to other proposals, such as whitelisting and coinvestment quorum and supermajority requirements update as well as setting the guidelines for a delegation system.
  • With a long enough duration, it is a guaranteed that we will have more information on Bancor V3 to make a better decision in the next round of extension votes.

Vote FOR to:

Extend LM rewards for the LINK pool for 12 weeks.

Vote AGAINST to:

Do NOT extend LM rewards for the LINK pool.

5 Likes

I do think it is important to continue providing LM rewards for our largest pools that contribute largely to fees and to preserve TVL in anticipation of V3. Bancor is still in a growth phase and it is in the protocols best interest to retain LPs. I will definitely vote for this proposal. That being said, do we have a timeline of when V3 will roll out?

6 Likes

We don’t have an estimate for V3. The team has made it clear that they aren’t interested in providing timelines since these are always taken too literally. This is software development after all. That said, we’ve been hearing about shadow pools for awhile and without quoting anyone directly, we’ve seen Bancor team members state how surprised they were that these proposals failed. Surprises in software development are bad.

The point, IMO, is not to be a perfect proposal but to be a bridge to V3. This is a kind of emergency proposal. We don’t know enough about the consequences to let these fail right now. The community took their passing for granted and didn’t make a strong enough defense.

Unfortunately, we’ve seen that if the pools lose their LM, they’re really hard to get back, so it’s important we make the best case now, get the most people involved, and let the chips fall where they may.

edit: This tweet from Nate is one such example of the team communicating to us without specifics. Again, this is just a bridge to V3 so we maintain stability.

8 Likes

I’ll be voting no on this proposal.
The only change was a reduction from 12 to 8 weeks, and includes a blatant lie.
(Edit: every time I refresh the page the timeframe changes. The only thing the new proposal does is allow for negotiation on time frame of rewards. This was never the issue. The size of the rewards and lack of clear plan moving forward are the issue.
None of these new proposals are accompanied by any sort of plan to make LM sustainable moving forward and for this reason, I will be voting against.)

We have already had proposals with their rewards reduced pass voting and be implemented. This language is different than the stable coin proposal which says they outright cannot be changed. Inconsistent messaging on every post - a blatant lie is sniffed out.

There was no good faith effort made to create a sustainable LM plan moving forward. I cannot reasonably see minting this much $BNT as a wise decision.

Serious implications here. Nothing abnormal occurring in the voting process. Votes are on chain and open to all. People are free to stake and participate whenever they want. 90% of the entire vBNT did not participate in the last vote. Voters simply do not care. We cannot “run it back turbo” any time people are upset with the results of a vote.

1 Like

X weeks doesn’t mean an infinite number of weeks. X is to be debated in the forum, so we can try to find a duration that everyone is comfortable with.

I have replied to the rest of your points in Proposal: Extend LM Rewards on DAI/USDC/USDT Pool For X Weeks (Attempt #2) - #3 by tfns

6 Likes

This post was flagged by the community and is temporarily hidden.

4 Likes

Funny, you didn’t seem to want to vote or comment on here until this proposal, so stop being hypocritical. People can absolutely vote again on this. LINK TVL is imperative to the success of Bancor and with COMP and AAVE adding more LINK rewards, without this renewal, puts the TVL in jeopardy. I find it hard to believe you are being genuine in turning down the rewards here. Inflation is minimal and burner is finally kicking in, stop being so impatient. I’m okay with cutting rewards back to be competitive with COMP and AAVE, but outright cancelling them is not wise.

5 Likes

I absolutely support this second attempt to pass LM Rewards.

We shouldn’t be shackled to a blindside vote orchestrated by a few whales.

Let’s see what the DAO really thinks about this proposal when the vote goes up. Looking forward to it!

2 Likes

What a great username :rofl:

The proposal is up for discussion. This means that the current proposal can suffer changes that arise from debate.

1 Like

So what do you propose then? What amount of LM is sustainable to you for this proposal?

Timeframe is just one of many things that can be debated. I think the strongest argument for these proposals is maintaining continuity until V3/shadowpools can come out. I don’t think I’ve seen good evidence that LM would not be sustainable for 1-3 more months. If you’d like to engage with the importance of continuity and change control, I’m sure we would like to hear your thoughts.

Re voting on these proposals is perfectly within bounds. Nothing abnormal occurring in the voting process. Votes are on chain and open to all.

2 Likes

Continuing rewards for this pool is important for protocol stability and growth as we head into V3.

For anybody worried about inflation from rewards, this stat here shows why it’s unwarranted.

1 Like

This is not quite correct. The team has mentioned that migrating to a new contract with a lower rate is very difficult (there was a convo in telegram about this):

Here is a screenshot from a conversation around this topic:

While it might sound trivial, this doesn’t appear to be the case. With the roll out of V3 coming out soon, what this renewal is really asking for is to give us enough leeway until the new version is out. At that point, the LM program would most likely be redesigned and this topic might be moot. We need to maintain the LM program so that we don’t lose liquidity until that occurs.

3 Likes

Will be voting FOR extension and encourage community to do the same. End of the day, the LM inflation isn’t extreme enough to dump the price and does a lot for the strength of the protocol through increased TVL, marketing and onboarding the crypto community as a whole.

5 Likes

The network creates $20m~ of BNT (at current prices - much higher two months ago) every month to pay for Eth, Link, and wBTC pools.

The network also $9m~ of BNT (at current prices - much higher two months ago) every month to pay for the stablecoin pool rewards

These pools combined bring in less than $3m in monthly fees to $BNT holders. (~half of the total fees)

Why is BNT crabbing? This is why.

A rebuttal that changed parameters would be welcome. A repeat proposal unchanged will do nothing more than trap new voters into the governance contract for 7 days and for that I applaud the author. We will build strong hands together.

The rewards program for this pool was designed at $.50c BNT and $500,000 TVL.

Current TVL exceeds $1,500,000,000 and $BNT price is $5~. It’s time to rework.

Why don’t we just not do anything destructive to our TVL and wait for V3? Cutting off LM drastically on our biggest pools is a massive risk with little reward.

image

4 Likes

Happy to deny this vote in favor of

The very argument for the proposal is that “changing the parameters” is ill-advised this close to a new product launch. I agree that LM rewards need to be reworked and fortunately, from messages like this from Nate we can see that they are.

I suggest we extend our rewards so there is no disruption. To make this painfully clear, so that it is clear to observers that you should engage with the point, pulling LM at this point is a big disruption that may cause a TVL loss spiral. Meanwhile, the protocol has shown that it can survive with LM. We should wait and see what the new solution is before blowing up what we have.

3 Likes